Smallcap Pharma Stock That Paid 15% Dividend In 2023, Has Touched New 52-Week High; Time To Accumulate?

Smallcap pharma stock, Strides Pharma Science has touched a new 52-week high of Rs 662 apiece on December 26th. Overall, in 2023, the stock that paid a 15% dividend in the year has rallied by a whopping 83.5% on BSE. Brokerage Geojit on Tuesday recommended accumulating the stock furthermore for a target price of Rs 731 apiece, which implies a potential 12% upside ahead. Currently, the stock is around Rs 652 apiece.

On BSE, after hitting a new 1-year high of Rs 662 apiece, Strides Pharma's share price ended at Rs 652.10 apiece, up by 2.5% on Tuesday with a market cap of Rs 5,991.52 crore. The stock paid up to Rs 1.5 per share dividends (15%) in the current year.

The latest surge in Strides Pharma could be attributed to its update on Stelis Biopharma's transaction with Syngene for the sale of Stelis' Unit 3 Multi-Model Facility in Bengaluru.

As per the regulatory filing, Strides stated that its associate company Stelis has received net consideration of Rs 563.2 crore for its sale of Unit 3 Multi-Model Facility to Syngene. It added that Syngene is withholding Rs 10 crores, which shall be released post-fulfilment of few additional
conditions by Stelis.

In its research note, Geojit said, Stelis Biopharma is strategically transitioning into the high-growth CDMO business "Onesource," aiming to achieve EBITDA and PAT positive in the H2FY24/FY25, respectively. In this transformation, Strides Pharma plans to demerge its Oral Soft Gelatin and SteriScience CDMO divisions, integrating them into Stelis Biopharma (OneSource). The company is currently awaiting regulatory approval for these changes and plans to subsequently list on stock exchanges."

Further, the brokerage pointed out that as part of optimizing manufacturing facilities, Strides plans to divest the Singapore facility to an Rxlinet Biohub and the Stellis plant to Syngene. These will be expected to be completed in Q3 FY24 and will reduce the debt further. Moreover, the company currently has more than 260 active ANDAs and plans to launch 10-15 products annually in the U.S., improving future revenue visibility (~$250 million in FY24). In the emerging markets, a robust product pipeline and new registrations in newer geographies are poised to propel growth in the short term.

On the outlook and valuation, Geojit's note said, "New product launches in the US and cost optimisation measures will drive earnings ahead. The outlook for the other regulated markets continues to remain robust, given strong order book visibility. Stelis is likely to benefit from both an improving balance sheet and a promising uptick in revenue. However, in light of the recent rise in the prices and growing concerns on higher valuation, we downgrade our rating to "Accumulate" based on 36x FY26E EPS and a target price of Rs. 731."

Strides Pharma is an R&D focused, vertically integrated pharmaceutical company with an experienced management team having a presence across multiple therapeutic segments.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.